Is the stock market over heating?

A_Flock_Of_Sheep

grey_gym_sock wrote: »

no, it doesn't. so if given the choice of a £400k pension fund or a £17.5k* guaranteed index-linked pension, the guaranteed pension is probably the better option.

the £400k fund might do better, but it's riskier. the 4% withdrawal rate i assumed is fairly cautious, when you allow that, if you end up depleting the real value of your remaining pension fund, you have the option of buying an annuity later on, when your actuarial life expectancy is low enough that you can get better rates.

final salary pensions are great if you can get them (and they're not only in the public sector). but the best thing you can do if you can't get them is not usually to buy something strictly equivalent. if you insist on doing that, you make retirement provision more difficult than it has to be.

*£17.5k guaranteed pension, because after adding on £7k state pension, and again with £2.5k NI saved compared to a salary, that's about equivalent to a £27k salary.

I have a final salary pension brewing.

gadgetmind

grey_gym_sock wrote: »

the £400k fund might do better, but it's riskier. the 4% withdrawal rate i assumed is fairly cautious

Too cautious, IMO. Use Firecalc on higher levels of drawdown *but* model for state pensions coming in later on (most people retire before SP age) and you'll find that many people can use 5%+ for a few years/

Glen_Clark

grey_gym_sock wrote: »

no, it doesn't. so if given the choice of a £400k pension fund or a £17.5k* guaranteed index-linked pension, the guaranteed pension is probably the better option.

the £400k fund might do better, but it's riskier. the 4% withdrawal rate i assumed is fairly cautious, when you allow that, if you end up depleting the real value of your remaining pension fund, you have the option of buying an annuity later on, when your actuarial life expectancy is low enough that you can get better rates.

final salary pensions are great if you can get them (and they're not only in the public sector). but the best thing you can do if you can't get them is not usually to buy something strictly equivalent. if you insist on doing that, you make retirement provision more difficult than it has to be.

*£17.5k guaranteed pension, because after adding on £7k state pension, and again with £2.5k NI saved compared to a salary, that's about equivalent to a £27k salary.

Probably a daft question, but How did you calculate how long you are going to live

sabretoothtigger

A_Flock_Of_Sheep wrote: »

I have a final salary pension brewing.

They are endangered species, if it was me I'd be paranoid about it going extinct on me

My grandma has been collecting her husbands pension for almost 40 years, the poor beggar never saw any of it himself.
He built that up in the 70's when doing overtime made you poorer thanks to weird 70's tax laws, his earnings for 60 hours was less then his stock hours but they did give a nice pension at least

How did you calculate how long you are going to live

laws of probability Actuaries are paid to know all, but older means more per year, I'd delay too if possible

Glen_Clark

sabretoothtigger wrote: »

They are endangered species, if it was me I'd be paranoid about it going extinct on me

My grandma has been collecting her husbands pension for almost 40 years, the poor beggar never saw any of it himself.
He built that up in the 70's when doing overtime made you poorer thanks to weird 70's tax laws, his earnings for 60 hours was less then his stock hours but they did give a nice pension at least


laws of probability Actuaries are paid to know all, but older means more per year, I'd delay too if possible

There was something similar at the BP depot at Eakring. Your pension was based on your final salary - including overtime. So those in their final year, 64 years old, were working longer hours than they had ever worked before - BP would let them do it!!!.

grey_gym_sock

Glen_Clark wrote: »

Probably a daft question, but How did you calculate how long you are going to live

i didn't ... 4% is a rate you might hope to draw from investments without ever running out, and with both income and capital increasing roughly with inflation.

however, investment returns vary, and if you're unlucky with when you start, it won't last forever. hence my backup plan of buying an annuity later on, when you're old enough to get much higher rates. the backup plan is a bit vague, though. firecalc might help give a better answer.

on the other hand, if it all goes well, you'd be left with a lot of capital in the end - which is better than a final salary scheme. though of course that's not the primary aim.

Glen_Clark

grey_gym_sock wrote: »

i didn't ... 4% is a rate you might hope to draw from investments without ever running out, and with both income and capital increasing roughly with inflation.

however, investment returns vary, and if you're unlucky with when you start, it won't last forever. hence my backup plan of buying an annuity later on, when you're old enough to get much higher rates. the backup plan is a bit vague, though. firecalc might help give a better answer.

on the other hand, if it all goes well, you'd be left with a lot of capital in the end - which is better than a final salary scheme. though of course that's not the primary aim.

Well the only one who is guaranteed to do better out of that is the financial advisor who keeps hold of the clients funds instead of handing them over to an insurance company to buy an annuity.
The annuity is still the only way to security and piece of mind for the client.

srcandas

Back on the overheating (as opposed to bankholiday overeating )

Japan (-2.5%), Australia, NZ, KL, Jakarta, Philippines continue the slide. China SSE sits flat. HK, Taiwan and Kopsi make a little progress.

Patchy but certainly negative overall. And negative commodity thoughts being expressed (Steel over production in China).

Perhaps London having a day off is no bad thing. A little way to go me thinks.

How are you spending your bankholiday: looking for bargains, planing to sell, or sitting on your cash?

gadgetmind

Glen_Clark wrote: »

The annuity is still the only way to security and piece of mind for the client.

True, but those who are happy to manage their own drawdown pots, and who understand asset allocation and volatility, can get a much better income earlier on and then stand a very good chance of a higher annuity once they are a bit older.

Yes, less security, but what index linked joint annuity would someone get at age 55?

Ark_Welder

srcandas wrote: »

...China SSE...

Is that a premonition of a takeover?

The bank holiday will be largely spent transplanting marigolds (of the plant variety, and not a rubber plant either).

I have already Sold in May - if just over 1% can be termed as 'Sold'. As much because equities were overweight and cash under. Still the situation now, but less-so than before.